New York Times (NYT) Down 8.2% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for New York Times Co. (NYT). Shares have lost about 8.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is New York Times due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

NY Times Q3 Earnings Beat Estimates, Subscriptions Rise

The New York Times Company posted third-quarter 2021 results, wherein both the top and the bottom lines not only surpassed the Zacks Consensus Estimate but also improved year over year. Subscription revenues rose during the quarter. Both print and digital advertising revenues showcased an increase from the year-ago period. The company also launched paid subscriptions to Wirecutter.

The company delivered adjusted earnings from continuing operations of 23 cents a share, which beat the Zacks Consensus Estimate of 20 cents and improved by a penny from the prior-year reported figure. Total revenues of $509.1 million surpassed the Zacks Consensus Estimate of $498 million and surged 19.3% year over year buoyed by robust digital subscription and advertising revenues.

Meredith Kopit Levien, president and CEO, said, “This was our best third-quarter performance in both News and total net subscription additions since the launch of the digital pay model more than a decade ago, and, outside of 2020, our best quarter ever for digital subscription additions.”

Subscription Revenues Rise

Subscription revenues improved 13.8% to $342.6 million primarily due to increase in the number of subscriptions to the company’s digital-only products, which include news product, and Games, Cooking, Audm and Wirecutter, as well as a benefit from subscriptions graduating to higher prices from introductory promotional pricing. Revenues from digital-only products jumped 27.9% to $198.6 million. Print subscription revenues fell 1.2% to $144 million due to lower domestic home delivery revenues and lesser single-copy revenues.

The company ended the quarter with approximately 8,383,000 subscriptions across its print and digital products. Management notified that the number of paid digital-only subscribers reached roughly 7,588,000 at the end of the quarter — rising 455,000 sequentially and 1,525,000 year over year. Of the 455,000 total net additions, 320,000 came from the digital news product, while the remaining came from Games, Cooking and Wirecutter.

Management envisions fourth-quarter 2021 total subscription revenues to increase about 12%, while digital-only subscription revenues are anticipated to surge approximately 25%.

Advertising Revenues Grow

Total advertising revenues were $110.9 million in the reported quarter, up 39.9% year over year.

Print advertising revenues surged 39.4% to $43.9 million in the quarter under review. The metric increased, mainly in the luxury and entertainment categories, as a result of the impact of the comparison to soft print advertising revenues in the year-ago period owing to lower advertiser spending because of the pandemic.

Digital advertising revenues soared 40.2% to $67 million. This year-over-year increase can primarily be attributed to higher direct-sold advertising, including traditional display and podcasts, as well as the impact of the comparison to soft digital advertising revenues in the prior-year quarter.

Total advertising and digital advertising revenues are anticipated to increase in the mid-teens in the final quarter. However, we note that the rate of growth is likely to decelerate from the third quarter, partly as a result of more difficult comparisons in the fourth quarter.

Other Highlights

We note that other revenues grew 19.1% to $55.6 million during the quarter under review due to higher licensing and commercial printing revenues. Management anticipates other revenues to jump approximately 15% in the fourth quarter.

Adjusted operating costs rose 19.9% to $444.1 million during the quarter. Management anticipates adjusted operating costs to increase approximately 17-20% in the fourth quarter, as the company continues to invest in the drivers of digital subscription growth.

Total adjusted operating profit grew 15.1% to $65.1 million during the quarter under review. Higher subscription, advertising and other revenues more than offset increase in adjusted operating costs.

Financial Aspects

The New York Times Company ended the quarter with cash and marketable securities of about $1.04 billion. The company has a $250 million revolving line of credit through 2024. As of Sep 26, 2021, the company had neither outstanding borrowings under the credit facility nor other outstanding debt obligations. It incurred capital expenditures of about $11 million during the quarter. Management envisions capital expenditures of about $50 million in 2021.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -10.39% due to these changes.

VGM Scores

At this time, New York Times has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, New York Times has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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